It took
Regina E. Dugan nearly 15 years to rise through the ranks to become director of
the Defense Advanced Research
Projects Agency (DARPA). Starting as a DARPA manager in 1996,
she assumed a variety of roles over the next decade and a half. But now
her climb to the top has been endangered by a financial scandal that has all
the workings of a blockbuster -- allegations of nepotism, government
corruption, and ethics violations.

The scandal and active government investigations stem from a small defense
contractor, RedXDefense, LLC, which Ms. Dugan launched in 2005. Serving
as President and CEO, she decided in 2009 to
depart when she was offered the position of DARPA director.

When she left RedXDefense, most expected she would cut all financial ties to
the company. After all, the previous Bush administration's DARPA
director, Tony Tether, reportedly had strict policies when it came to fiscal
accountability. States a former DARPA program manager in an interview
with Wired, "With Tony, there wasn’t a little line. There was
a valley. You either sell your stock [in your old firm], or there's the door.
With Regina, things were very different."

Another ex-DARPA employee warns, "You could pull a lot of money out of
that place if you really wanted to. There really isn't any due diligence
there."

RedXDefense recently earned a $1.7M USD payday in research contracts -- a
small, but notable chunk of DARPA's $3B USD annual budget. Meanwhile Ms.
Dugan still holds over $15,000 USD
in private shares of RedXDefense and is owed a
loan of $250,000 USD from RedXDefense. Her former employers new
boss is a familiar face, as well -- her father.

Ms. Dugan claims the awards to RedXDefense were fair, as she recused herself of
the decision. But there's concern that the way Ms. Dugan has redefined
ethics rules at the firm may allow for abuse.

II. Regina Dugan Conveniently Redefines DARPA's Ethics Guidelines

Here's how it works.

Under Tony Tether’s reign of DARPA, if you had stock with a company or used to
work for a company/university seeking a DARPA bid, that firm was automatically
disqualified from the contract if there were any other competitive bids.
Even if the former employer was the only bidder, the ex-employee still
had to sell their stock options, before any award could be made.

Critics were unhappy with this policy, as they said that if employees took a
research sabbatical at DARPA, it automatically precluded them from potentially
hundreds of millions of dollars of DARPA contracts.

The critics were pleased when Ms. Dugan took office and redefined DARPA's
ethics policy. Under her rules, program managers no longer had to sell
their stock if a former employer received a contract. The only remaining
restriction was that the former employee had to recuse himself or herself,
designating a suitable alternative project manager to lead the effort.

DARPA deputy director Ken Gabriel called the rules "more realistic",
and agency spokesperson Eric Mazzacone bragged, "These policies and
practices are in place so that qualified people can come to government service
and to ensure that all organizations have access to fair and open competition;
neither favored nor disfavored."

But the new rules open a peculiar door, which Ms. Dugan appears to have crossed
through. She passed the decision on whether to award a contract to her
family firm to a subordinate, someone whose job is dependent on her approval.

Nick Schwellenbach, director of investigations at the Project on Government
Oversight comments, "If I was a DARPA employee. I wouldn’t want to be in a
position of depriving my boss' family members of a large contract."

III. The Sheriff Steps In

The incident has stirred up the whole beehive, though, and now the full
scrutiny of government auditors is bearing down on DARPA. The Pentagon's
Inspector General (IG) has launched a major investigation, not only
into the RedXDefense contract, but every other DARPA contract approved during
Ms. Dugan's two-year tenure as DARPA chief.

One of the targets of the probe is airship builder Aeros, who counts Tony
Tether as a member of its board of advisors. The irony here is that under
Mr. Tether's rules that relationship would likely have precluded Aeros from the
contract, but Mr. Tether appears to be happily taking advantage of the new
rules, now that he's gone.

The IG writes, "The current audit will 'determine the adequacy of DARPA's
selection, award, and administration of contracts and grants awarded in FY 2010
and FY 2011 for research and development projects.'"

Meanwhile, the IG is launching a separate inquiry that specifically targets Ms.
Dugan and RedXDefense. In a letter sent
to the Project on Government Oversight the
IG describes the investigation as a probe into "Regina Dugan's continued
financial and familial relations with DARPA contractor RedXDefense."

At this point it's all allegations, but there seems a strong possibility that
RedXDefense may find some of its contracts disappearing.

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This article is over a month old, voting and posting comments is disabled

completely disregard the other two replies should of proof read better

"If a gov't person has connections to a company they should not be allowed to win a contract." That is a definition of a corrupt system.

So if a company has a product that costs less is more efficient than all of the rivals but one of there employees with shares now works for darpa that means darpa should not be allowed to award the contract to that company. Your telling me that isn't corrupt